Experts call for a policy turnaround as industrialization chicken comes home to roost

A farmer harvests corn at a corn field in Sai Son Village, outside Hanoi. Photo: Reuters

Hi-tech and IT industries may be the glamour sectors as Vietnam seeks to become a modern, industrialized nation, but experts say it is sometimes better to focus on the bedrock of the nation's growth, the agriculture sector.

In what amounts to a mea culpa over the nation's economic restructuring strategy that focused on reducing the role of the agricultural sector in the economy, they are now saying the glut of industrial parks in all parts of the country, built on precious farmland, was a mistake.

Tran Dinh Thien, director of the Vietnam Economics Institute, said the agricultural sector is one in which Vietnam has had a natural, original advantage and it can continue to drive the nation's growth.

Phan The Rue, a former trade minister, said policymakers have prioritized industrial production, but agriculture is the resilient sector that can help the economy survive tough times and maintain a stable employment rate.

While most of Vietnam's industrial products are very low in the supply chain in terms of value, its agricultural exports are competitive, he noted.

Vietnam's exports of agricultural, forestry and fishery products in the first half of 2012 reached US$13.6 billion, up 14 percent from the same period last year. The sector, which is less dependent on imported materials than other industries, posted a trade surplus of $5.7 billion. Exports of agricultural produce alone amounted to $7.7 billion.

The agriculture ministry has said the global market is not stable yet, but Vietnamese agricultural and fishery exports can reach $27 billion by the end of the year.

Professor Nguyen Van Ngai of the Ho Chi Minh City University of Agriculture and Forestry said Vietnam should develop agriculture as the spearhead sector and build other industries around that.

Agricultural production is not just about growing rice and coffee, it is also to do with processing and machinery, he said, noting that these related industries would add more value to agricultural products.

Ngai also said it was poor strategy for provinces with agricultural advantages to build industrial parks, citing the Mekong Delta province of Ben Tre as an example.

"It's necessary to have industrial parks, but it's just so wrong to emphasize industry and services over agriculture in provinces that have done very well with agriculture," he said. "There have been too many industrial parks built over farmland in Vietnam in recent years."

Support for farmers

About 70 percent of Vietnam's population live in rural areas and 48 percent depend on agriculture for their livelihoods, according to the Food and Agriculture Organization of the United Nations.

But despite its dominant role, the sector is not well organized, experts say, noting that farmers generally work separately, with households being the main unit of production.

Economist Le Dat Chi said that because there is no large scale and united production, farmers are often at a disadvantage in negotiating prices with traders. Besides, it is not easy to apply new technologies to small-scale production of crops, he said.

Chi said the government has offered favorable credit policies for the sector, but so far it is mostly large state-owned companies that have been given cheap loans to stockpile rice and coffee while most small farmers are still unable to access credit and expand production.

"Once farmers have shifted to large-scale production, other services and related sectors will grow too," he said.

Professor Vu The Dung from the University of Technology in HCMC, one of Vietnam's leading schools, agreed that industrialized commercial farming is the way to go.

Dung said the country used to follow the model of agricultural cooperatives where farmers worked and shared their resources together, but it did not work out well. In order to encourage farmers and companies to invest in large farming projects, the government should provide incentives and even consider changing land ownership policies so that investors and farmers do not have to worry about farmland being taken back.

On a national level, different regions should focus only on what they can do best. For example, the Mekong Delta can focus on farming, leaving research and distribution to other places that can handle the jobs better, he said.

Empty promises

The government last year piloted a commercial farming scheme in which farmers grow high-quality rice varieties in large cultivation areas where new technologies and machinery can be used to boost productivity. The authorities would coordinate with the farmers to find buyers for their produce.

According to the Ministry of Agriculture and Rural Development, the program, which was launched in the Mekong Delta in March 2011, has seen "positive results" with the participation of thousands of farmers. The total rice growing area under the scheme has expanded to 19,000 hectares from 7,800 hectares last year.

Bui Chi Buu, deputy director of the Vietnam Academy of Agricultural Sciences, said the pilot program is a first step in the right direction.

But Buu said the agriculture sector needs more support from the government because so far "there have been so many promises but not much has been done."

Vietnam is the world's largest pepper exporter, the second largest coffee producer after Brazil, and the second biggest rice shipper after Thailand.

Chairman Dang Le Nguyen Vu of Trung Nguyen Company, one of Vietnam's top coffee producers, said any of these three products deserves more attention from the government because they have the potential to put Vietnam on the brand map.

He said Vietnam is capable of exporting $20 billion worth of coffee a year, but there has to be a plan to develop and complete the production chain and promote the product globally.

"Without strategic planning from the government, it's like we producers are walking on one leg. We can't move fast."